(Answer: All of them.)
We once heard this cute and to the point riddle at a valuation seminar. Recognizing the valuation issues in ownership methods is critical in valuations. The fact is that tenants in common (TIC) interests in real property are generally subject to substantial valuation discounts. This can be particularly helpful in estate cases. The tax courts have held that TIC interests should be afforded several discounts. In LeFrak v Commissioner of Internal Revenue (T.C. Memo 1993 526), the U.S. Tax Court held that a TIC interest warranted both a lack of marketability discount and a minority interest discount.
The degree which valuation discounts can be taken on TIC interest is directly associated with the related risks in this form of ownership. The consideration of these risks should be fully exploited in a valuation case.
Lack of Control
Lack of Marketability and Liquidity
Potential Family Ownership Risks
The Uncertainty of Co-Owners
The Assumption of Liability
The Lack of Written Agreement